Every day billions of dollars exchange hands on the stock market. That is a fact that I'm sure you knew already. What you may not have known is that the very same market is comprised of an astonishingly large number of non-professional investors. Just people interested in increasing their wealth in a way that when done right can bring rich rewards or when done wrong or impulsively can lead to large losses.
For all intents and purposes, we are assuming that you the reader are interested in being the former. In order to get started off on the right foot there is 3 basic steps involved to make your entrance into the stock market a successful one.
If you have never had any experience in the stock market or even if you do but are interested in increasing your share in the market, there is an important step that can save you a lot of trouble and heartache down the road. Keeping a trading journal.
A trading journal isn't just some simple list of what stocks you own or are interested in buying and their stock prices. A trading journal should include as much information as possible about the type of investments being made and why. Did hearing a certain news story pique your interest in a specific company? If so note it and any changes in the market that follow. By doing so, you will be able to see possible trends in the investment decisions you make. By tracking how your decisions affect your trading, you can spot potentially dangerous trends and work to correct them.
Using a trading journal will also help you to keep from making quick decisions when you don't have to. If there is a stock that you have been watching for a while, why not track its movement over the course of weeks or even months. Again take note of what factors have a bearing on the stocks movement, up or down.
A trading journal has immense value as a practice tool for those that have reservations about entering the stock market. One way for many to become more comfortable is to try simulating investment strategies. Give yourself a generous amount to simulate with, it will make it easier to absorb losses, and it helps to see where investing can take you over time. Let's say you start with $100,000. Then decide what kind of stocks you may be interested in purchasing once you begin using real money.
Don't forget, since this is a simulation, any broker fees should also be included to give the most accurate results. Resist the urge to dump everything into one stock or to spread yourself too thin. Pick a handful of companies that you have researched. Look for any recent information or press releases that could show any potential problems or promise for an investor. Keep day-to-day information in the trading journal for anywhere from a month to several months depending on your level of comfort in the market.
Keeping a trading journal is an invaluable tool for the non-professional investor as it helps you refine your strategies and avoid potential issues.
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